Assuming All of the Following Firms Have a Required Return

question 51

Multiple Choice

Assuming all of the following firms have a required return of 14 percent,which would you expect to have a positive present value of growth opportunities?

• A) a firm with a P/E ratio of 9.
• B) a firm with a P/E ratio of 6.
• C) a firm with an E/P ratio of 20 percent.
• D) None of the choices are expected to have positive PVGO.

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Definitions:

Time Interval

A specific duration of time between two points or events.

Input Prices

The cost of resources used in the production process.

Market Period

A short time frame in which the supply of a commodity is fixed, typically because the production process cannot be adjusted quickly.

Supply

The total amount of a specific good or service that is available to consumers at various price levels.